USD/CAD is declining. According to BBH FOREX analysts, the Bank of Canada's (BOC) marginally dovish stance was overshadowed by the decline in US rate forecasts.
Despite the BOC's dovish stance, USD/CAD declines.
"The BOC maintained the policy rate at 2.75% for a second consecutive period, as was mainly anticipated. "There was a broad consensus to hold policy unchanged," the BOC noted, adding that "underlying inflation could be firmer than we assumed" and "the Canadian economy is softer but not sharply weaker."
"On balance, members believed that a cut in the policy rate could be necessary if the economy suffers in the face of ongoing US tariffs and uncertainties, and cost pressures on inflation are contained," the BOC said, leaving the door open for further easing.
"On July 30, the BOC will hold its next meeting and release its quarterly Monetary Policy Report. Following yesterday's BOC policy announcement, the swaps curve showed little movement. The swaps market is still pricing in a 40% chance of a 25 basis point decrease in July and about 50 basis points of easing over the course of the following 12 months. In such case, the policy rate would fall to the lower end of the BOC's estimated neutral range, which is between 2.25 and 3.25 percent.
Despite the BOC's dovish stance, USD/CAD declines.
"The BOC maintained the policy rate at 2.75% for a second consecutive period, as was mainly anticipated. "There was a broad consensus to hold policy unchanged," the BOC noted, adding that "underlying inflation could be firmer than we assumed" and "the Canadian economy is softer but not sharply weaker."
"On balance, members believed that a cut in the policy rate could be necessary if the economy suffers in the face of ongoing US tariffs and uncertainties, and cost pressures on inflation are contained," the BOC said, leaving the door open for further easing.
"On July 30, the BOC will hold its next meeting and release its quarterly Monetary Policy Report. Following yesterday's BOC policy announcement, the swaps curve showed little movement. The swaps market is still pricing in a 40% chance of a 25 basis point decrease in July and about 50 basis points of easing over the course of the following 12 months. In such case, the policy rate would fall to the lower end of the BOC's estimated neutral range, which is between 2.25 and 3.25 percent.
